Generated by SassMeister.com.

SassMeister-input.scss

// ----
// Sass (v3.4.11)
// Compass (v1.0.3)
// ----

// Your Example
#id > .element {
    #{selector-unify(&, div)} {
        color: blue;
    }
}

// My Proposed Example
#id {
  > .element {
    @at-root #{selector-replace(&, '.element', 'div.element')} {
        color: blue;
    }
  }
}

SassMeister-output.css

#id > .element #id > div.element {
  color: blue;
}

#id > div.element {
  color: blue;
}

With

.parent {
  .child {
    @at-root #{selector-replace(&, '.child', '.class .child')} {
        color: red;
    }
  }
}

I get this instead:

.parent .class .child,
.class .parent .child {
  color: red;
}